"Comments presented at the Organized Symposium on 'National and Regional Self-Sufficiency Goals in International Agriculture: implications for U.S. Agriculture.' Annual Meetings of the American Agricultural Economics Association, East Lansing, Michigan, August 3, 1987."

John M. Staatz
Assistant Professor
Department of Agricultural Economics
Michigan State University

Comments presented at the Organized Symposium on "National and
Regional Self-Sufficiency Goals in International Agriculture:
Implications for U.S. Agriculture." Annual Meetings of the
American Agricultural Economics Association, East Lansing,
Michigan, August 3, 1987.

Agricultural Economics Staff Paper No. 87-49

THE ECONOMICS OF AGRICULTURAL SELF-SUFFICIENCY*

I. Preliminary Observations

A. In analyzing the movement of an increasing number of
countries towards food self-sufficiency, it is
necessary first to be clear what we mean by the term.
By self sufficiency, economists usually mean the
equation of domestic supply of a good (in this case,
food) with domestic effective demand. This implies
that:

1. Self-sufficiency does not imply adequate food
intake by all people of the country concerned, as
self-sufficiency is defined only with respect to
that need for food which is backed up with either
private or public purchasing power (i.e.,
effective demand).

2. Self-sufficiency can only be defined with
reference to some price level. If a government
wants to impose a high level of protection for
domestic agriculture, the country can be self-
sufficient, albeit at a high cost to consumers
(via high food prices) or to taxpayers (via the
tax cost of subsidized inputs and/or deficiency
payments to agriculture).

3. Where domestic production fluctuates significantly
from year to year, self-sufficiency needs to be
defined with respect to some time period. Does
the country mean by self-sufficiency that it will
never import commodity X? Import it only 1 year
in 5? etc.

4. Food self-sufficiency is not the same as food
self-reliance. The latter refers to the ability
of a country to feed itself either from own
production or via imports paid for by foreign
exchange earnings. This distinction is sometimes
lost by low-income countries striving for food
self-sufficiency.

5. Self-sufficiency is much more likely to be
achieved quickly where the domestic market for the
good in question is thin. For example, if most of

*Fred Ruppel provided helpful comments on an earlier version
of this paper.

the production is consumed on the farm, a
relatively small increase in production results in
a proportionately much larger increase in marketed
surplus, which, if not offset by a large increase
in effective demand, can quickly lead to market
gluts. This is particularly relevant to the
recent emergence of "surpluses" in some LDCs,
especially in Africa.

B. Because food self-sufficiency is a function of both
supply and effective demand, different countries'
policies of encouraging self-sufficiency can be
usefully analyzed by decomposing them into the effects
they have on supply and the effects they have on
effective demand. Furthermore, if the U.S. is
interested in expanding exports to these countries
(decreasing their self-sufficiency), understanding both
the demand and supply sides of the problem will
facilitate planning policies that could expand exports.

C. Self-sufficiency in a particular product may often be a
secondary objective or a byproduct of policies aimed at
reaching some other objective--e.g., income support to
farmers..

II. Rationales for Pursuing Food Self-Sufficiency Policies

A. Risk/stability considerations

1. Recognition by government leaders of the domestic
political and economic costs of short-term food
shortages, coupled with the perceived
unreliability of international markets or the
inability of domestic entities that deal in those
markets (private firms, parastatals) to handle
such short-term shortages through imports.

2. Recognition of the international political costs
of relying on food imports (potential use of food
as a weapon by exporter--e.g., the case of the US
tying food aid shipments to India in the late
1960s to concessions by India in its foreign and
domestic policies). This rationale includes the
oft-cited goal of "national prestige."

3. This view may overlook the stabilizing effect of
international trade in offsetting fluctuations of
local production. Capitalizing on this potential,
however, requires developing domestic institutions
that deal effectively in international markets (a
major limit for some LDCs)

B. The country may have previously limited agricultural
growth through high levels of explicit or implicit
taxation of agriculture, often in hopes of extracting a
surplus for investment in other sectors. The
government may have changed those policies in
recognition of their costs to the overall economy in
terms of forgone growth (case of several LDCs
recently).

D. Attempt to channel domestic income into savings rather
than consumption (USSR until 1972, China) or to channel
consumption away from goods in which the country has no
comparative advantage (e.g., Japan's price policy with
respect to beef.)

E. Infant industry argument--Attempt to build new
industries in which the country may have a long-run
comparative advantage (import substitution of various
agricultural products).

III. Mechanisms Used to Influence Self-Sufficiency

A. Supply side policies

1. Policies that enhance domestic production

a. High support prices, often enforced through
trade restrictions. Question of how long
such policies are sustainable (e.g., the
European Community's CAP)

b. Input subsidies

c. R & D and human capital formation to foster
the development of new, lower cost
technologies for agriculture or the
importation and adaptation of those
technologies from abroad (case of the Green
Revolution)--Subsidized technological change

b. Capital-intensive bias of new technologies
and of growth strategies (some LDCs)

5. Nonprice rationing (e.g., Cuba, China until
recently)

C. Some of the emerging self sufficiency, particularly
among some LDCs, represents these countries' success in
expanding supply due to improved technology (e.g.,
India) or good weather (sub-Saharan Africa) combined
with fairly poor performance in expanding effective
demand through employment generation. If these
countries were as successful in expanding incomes
(particularly rural incomes) as they have been in
expanding food supplies, these countries' self-
sufficiency would quickly disappear.